Client Onboarding (CDD) Process – Assessing High Risk Account Transactions
When assessing a customer's AML risk rating, during the client onboarding phase, AML and Compliance officers normally consider the expected type of transactions and the anticipated level of transactional activities that the customer will be involved in.
Anticipated Transaction Types
Based on information received from a new customer during client onboarding, the financial firm develops a profile of the customer. A customer’s profile includes future transaction types that the customer will be expected to engage in.
Image Source: CDD Process
When generating a customer’s AML risk rating, the type of expected transactions normally impacts whether the customer is considered a low, medium or high-risk customer.
Examples of High-Risk Transactions Include:
- A customer that processes cash transfers and payments on behalf of other parties
- A customer that conducts transactions that are cash intensive in nature (huge amounts of cash)
- A customer that conducts transactions with individuals or entities that are located in high-risk countries (i.e., countries like Colombia that are considered high AML risk countries)
- A customer that is opening an account that will also be used by others (i.e., unregulated entities or other individuals with check-writing privileges to the account)
Anticipated Transactional Activities
The anticipated level of transactional activities also needs to be assessed and documented during client onboarding.
This is an essential process as it drives the financial firm's ability to monitor and automatically detect inconsistent, unanticipated or unexpected activities for that particular customer.
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